Irene Rosenfeld serves up new “rules of the road”

Since her return to Kraft Foods, the chairman and CEO has led the company’s return to profitability and growth. Here, Irene Rosenfeld shares her guidelines for successful transformational change in any organization.

For the past three years, the nearly 100,000 employees of Kraft Foods have been on a journey to literally create a new Kraft Foods — a global powerhouse in snacks, confectionery and quick meals.

When I returned to our company in 2006, we were not living up to our potential. We began our turnaround journey by soliciting input from our employees and stakeholders around the world. They were passionate in describing our challenges and opportunities.

Then, we turned their insights into action by unveiling four strategies that provided the framework for our transformation and our return to sustainable, profitable growth.

The strategies were to:

Rewire our company for growth by strengthening our leadership team and decentralizing our organization;

Reframe our categories by making our products relevant to consumers again and by ramping up our innovation pipeline;

Treat sales as a competitive advantage rather than an overhead cost;

And drive down costs … without compromising the quality of our products.

Over the last three years, these strategies have clearly taken us where we wanted to go. The results speak for themselves:

In 2008, we expanded our top-line growth to nearly 7%. Operating income grew by about 3% in Europe, 5% in North America and almost 18% in Developing Markets.

In 2009, we’re continuing to invest in growth. Over 80% of our revenues now come from products that hold No. 1 share positions. We are also poised to deliver profit margins at or above industry averages, and to consistently deliver against our long-term earnings target of 7-9% EPS growth on a standalone basis.

The Kraft Foods turnaround contains some simple, but powerful “rules of the road” about leading successful transformational change in any organization.

1. Get the right people on the bus.

Under our Reframe strategy, we replaced half our executive team in the first year. Today, it combines people from both outside and inside our organization, who bring either a diverse perspective or deep Kraft Foods experience to their positions. These leaders weren’t afraid to challenge conventional wisdom and look at our business challenges with a fresh set of eyes.

Getting the right people on the bus also meant raising the bar on performance across the company. After giving people ample support and time to meet new expectations, we made the difficult decision to let many underperformers go. However, rather than create an atmosphere of fear, this instilled a sense of optimism and hope because our people now clearly understood what was required.

2. Give them a roadmap.

Leaders tend to focus on “what to do,” but the real issue is more often “how to do it.” Our roadmap was the four strategies mentioned above. Once we were all reading from the same map, we could move forward as a team.

3. Engage their hearts and minds.

People vote with their hearts, not their heads. For too long, our people had been focused on cutting costs … and it’s hard to get fired up every day to come to work and cut costs. We reignited their passion by focusing on something far more uplifting: growth. “Let’s Get Growing!” became our rallying cry, and we encouraged our people to think of Kraft Foods as a $40 billion startup. We also worked together to redefine the heart and soul of our company through a newly articulated higher purpose and positioning. Finally, we identified the values that would guide our behavior and embedded them in our new performance standards to ensure they will be more than just words on paper.

4. Move quickly.

During a transformation, it’s understandable to be hesitant about moving too fast, especially at the outset. For example, some of the early changes we made at Kraft Foods caused people to worry that we were going to figuratively turn all the lights off and put the organization on “tilt.” However, not only have we kept the power on, we’ve lit our entire village! Major organizational changes create uncertainty. But the point is to move quickly — faster than you are comfortable — because in hindsight, you will always wish you had made changes even sooner.

5. Communicate frequently, consistently and honestly.

How you manage change can make all the difference. During our transformation, we put a premium on communication from day one. This helped create an atmosphere of openness and trust. We also made a point of celebrating success … publicly and often. In business, we tend to spend a lot more time thinking about the problems than the triumphs. People need to know that what they’re doing is making a difference, and that their leaders notice and appreciate their efforts.

These five rules of the road have served us well during the past three years, and will continue to do so. I have every confidence that the changes we made during our turnaround have set Kraft Foods on a path to reliable growth for many years to come.

Biography

Irene Rosenfeld, ranked sixth on Forbes’ list of “The 100 Most Powerful Women 2008” and among BusinessWeek’s "Twelve Best Managers of 2008," is Chairman and Chief Executive Officer of Kraft Foods. A 26-year veteran of the food and beverage industry, she has a long history of bringing a consumer focus and innovation to building businesses. Over the years, she advanced in a variety of leadership roles at Kraft. Among her many accomplishments, she led the restructuring and turnaround of key businesses in the United States, Canada and Mexico, and the highly successful integration of the Nabisco acquisition. Irene also served on the senior team that led Kraft’s Initial Public Offering in 2001.

Rosenfeld began her career at Dancer Fitzgerald Sample advertising agency in New York and later joined General Foods in consumer research. In 2004 she was appointed Chairman and Chief Executive Officer of Frito-Lay, a division of PepsiCo, where she led the organization to accelerated growth in better-for-you products and developed a pipeline of health and wellness offerings.

Irene is active in a number of industry and community organizations, including The Economic Club of Chicago. She also serves on the Board of Directors for the Grocery Manufacturers Association and the Cornell University Board of Trustees.

She holds a Ph.D. in Marketing and Statistics, a Master of Science in Business Administration, and a Bachelor of Arts in Psychology from Cornell University.